Members of the Government Operations and Audit Committee have brought forward two bills that appear to target the gross conflicts of interest in South Dakota's EB-5 visa investment program. GOAC only glancingly acknowledged these violations of state law and policy and blamed what little it acknowledged on the dead Richard Benda while ignoring the violations committed by the very much alive and enriched EB-5 czar Joop Bollen.

One bill would make things better. One bill would make things worse. Guess which one GOAC members appear to prefer?

House Bill 1023 was the first Benda-Bollen bill submitted by Rep. G. Mark Mickelson (R-13/Sioux Falls) and six other 2014 GOAC members who returned to Pierre this session. It amends SDCL 5-18A-17 to extend an existing conflict-of-interest prohibition on state contracts (which already bans the kind of goofy contract Bollen signed with himself in January 2008) to cover state officials and employees for one year after they leave office (which would have banned Richard Benda's golden parachute with Bollen's state-contracted EB-5 management company SDRC Inc.). HB 1023 is short, simple, and sensible.

Rep. Mickelson threw his second Benda-Bollen bill, House Bill 1064, into the hopper just today. It has the same seven sponsors, plus Senator Deb Peters (R-9/Hartford). HB 1064 repeals the statute that HB 1023 amends, indicating this later Benda-Bollen bill is meant to replace the first. HB 1064 amends and expands SDCL 3-16 to ban self-dealing contracts as well as define exactly what kinds of "interests" the state will consider conflicts.

But check out the power Section 5 gives to the Governor and other executives to make exceptions:

A governing body may authorize an officer or employee whose responsibilities include approving, reviewing, or negotiating a contract on behalf of a state agency or supervising any employee who has these responsibilities to be a party to or derive direct benefits from a contract if:

The governing body has reviewed the essential terms of the transaction or contract and the state officer's or employee's role in the contract or transaction; and

The transaction and the terms of the contract are fair, reasonable, not contrary to the public interest, and fully disclosed in writing to the governing body.

The authorization, which may not be unreasonably withheld by the governing body, shall be in writing. The governing body may adopt a written plan to manage any perceived, potential, or real conflicts of interest associated with the state officer's or employee's role in a contract or transaction.

Any authorization given pursuant to this section is a public record. Each authorization shall be filed with the commissioner of the Bureau of Human Resources, who shall compile the authorizations and present them annually for review by the Government Operations and Audit Committee [House Bill 1064, Section 5, as published 2015.01.20].

House Bill 1064 defines conflicts of interest, extends the prohibitions against them, then grants the Governor, the Attorney General, and other Pierre potentates the power to pish-posh those prohibitions.

As an anti-bonus, Section 3 says the one-year post-employment extension only applies to contracts that would benefit the state official or employee in question to the tune of $100K or more. In other words, use your state job to write yourself a private contract that kicks in after you leave Pierre, and as long as you limit your pay to $99,999.99, you're in the clear.

Making sure we look out for our friends, Section 4 further dilutes the conflict-of-interest prohibitions by exempting state officers and employees whose ownership interest in a contracting entity is only 5% or less and by narrowing the definition of "direct benefit":

A state officer or employee does not derive a direct benefit from a contract based solely on the value associated with the officer's or employee's investments or holdings, or the investments or holdings of other adults with whom the state officer or employee lives and commingles assets, in an entity that is a party to the contract provided the officer or employee does not meet the requirement contained in subdivision (1) of this section [HB 1064, Section 4].

Call this the Skjonsberg Provision: last October, Lee Fang of The Nation discovered that Rob Skjonsberg, manager of the Rounds for Senate campaign, had cast a vote on the state Board of Economic Development to invest state dollars in Novita LLC, a company in which his investment company Lake Sharpe Investments had an interest. Skjonsberg said there was only a perception of conflict of interest, and state officials backed him up, saying Skjonsberg did not have a direct interest in Novita LLC. But the above passage of HB 1064 seems crafted to make explicit the fact that no, really, high rollers on the Board of Economic Development can keep voting money to projects in their indirect portfolios.

Both bills have been referred to ouse Judiciary, which Rep. Mickelson chairs. We'll see if he uses his position there to withdraw the simpler, stricter HB 1023 and promote the diluted, exemption-riddled HB 1064.

Mr. Mercer notes that Speaker Wink's constitutional conflict-of-interest excuse for firing Democratic House caucus secretary Kathy Tyler lies in the same topic bubble as House Bill 1023, which may be the only action the South Dakota Legislature takes in response to the EB-5 scandal. I gladly take up the comparison.

HB 1023 outlaws what EB-5 czar Joop Bollen did in 2008 and 2009:

The state paid Bollen to manage it's EB-5 visa investment program.

In January 2008, Bollen created a private company to do the work that the state was paying him to do.

In summer and fall 2009, Bollen negotiated a contract between the state and his private company.

On December 21, 2009, Bollen quit his state job.

On December 22, 2009, the state formally approved the contract Bollen had negotiated to pay his private company to continue running EB-5, allowing Bollen to claim profits that otherwise would have gone to the state.

Actually, state law already makes illegal what Bollen did in 2008, creating a private company to profit from his ongoing state job. HB 1023 simply extends that prohibition on a conflict of interest to one year after leaving the state's official payroll.

Joop Bollen far more directly and intentionally violated state law in 2009 than Kathy Tyler and the Democrats did. Kathy Tyler voted for a general appropriations bill last year that funds the ongoing position of House caucus Secretary, a job Tyler had no intention of seeking when she voted for the budget last March, since she intended to return to Pierre as a legislator from District 4. Voting for the general appropriation for the Legislature was not an effort to stitch a golden parachute for herself.

Republicans immediately fire Tyler for her debatable infraction. Republicans take no action to reclaim the funds Bollen illegally funneled into his own bank account with his violation of existing statute; they only consider a meager amendment of statute and stay mum on the crimes that arose under their own administration.

In the "No News Is Bad News" Department, I was wondering if the South Dakota Banking Commission had ever ruled on whether SDRC Inc., the controversial Aberdeen company into which Joop Bollen privatized his state duties as EB-5 visa investment manager, was a bank. Recall that in November 2013, I reported that SDRC Inc. had engaged in lending activities but never obtained a state lending license and never paid state bank franchise tax. Brown County, which could be out $1.76 million in tax payments from SDRC Inc., asked the state Banking Commission to look into SDRC Inc's bank status in September. Banking Commission Bret Afdahl said at that point the commission was looking into the issue and that companies like SDRC Inc. usually responded to requests for information within 30 days.

I contacted Director Afdahl Monday and asked what the Banking Commission had found or decided. Afdahl replied thus:

The Division of Banking is investigating whether a license is necessary for SDRC, Inc. and that investigation is not yet complete [Bret Afdahl, South Dakota Banking Commission, e-mail, 2015.01.13].

That sentence means what you think it means: SDRC Inc. remains under investigation, 90 days after we would have expected SDRC Inc. to have responded to the Banking Commission's request, and the Commission cannot comment further. But the rest of us can.

I would never have devoted 11% of my 2014 blog output to the EB-5 visa investment program if hadn't been for one man, a man who dictated much of this blog's focus without lifting a finger or uttering a word... because that man was dead.

Richard Benda in happier times, the Philippines, September 2012.

Richard Benda died of a gunshot wound on October 20, 2013. His unexpected and suspicious death prompted Governor Dennis Daugaard to reveal the existence last year of a federal investigation into activities that took place in the Governor's Office of Economic Development while Benda headed that office. That revelation drove media attention throughout 2014. We learned that Benda had diverted more than half a million dollars from state assistance to one EB-5 project, Northern Beef Packers, into his own pocket. But we also learned, among other things, that...

...the head of South Dakota's EB-5 program, Joop Bollen, signed a contract with himself in 2008 to assign his duties as a state employee to his own private company, where he could turn his work for the state into millions of dollars in fees;

...Bollen attempted to conceal a lawsuit against the state triggered by his own EB-5 activities in 2007 and 2008;

...Bollen and his associate James Park, neither of whom is licensed to practice law in or on behalf of the state of South Dakota, unsuccessfully litigated that lawsuit themselves in 2008;

...Northern State University, the Board of Regents, the Attorney General, and the Governor's office knew Bollen had committed these infractions;

...Governor Mike Rounds ignored all of these known violations and at the end of 2009 granted Bollen a lucrative no-bid contract worth potentially hundreds of millions of dollars to completely privatize the state's EB-5 program.

...Bollen made possible the half-million-plus golden parachute that Benda took from GOED to Northern Beef Packers.

...Benda and Bollen tried to arrange EB-5 investment money for the Hyperion refinery (a doomed project) and the Keystone XL pipeline (which already has all the funding necessary and for which EB-5 money would have represented no added value for the pipeline or South Dakota other than the millions that Bollen and Benda would have skimmed in EB-5 fees).

EB-5 czar Joop Bollen committed several violations of state law and policy. Senate candidate and former governor Mike Rounds knew about those violations and continued to reward and defend Bollen.

The research I've done, the conversations I've had, and the extraordinary efforts Mike Rounds and Marty Jackley and Larry Tidemann have undertaken blame Richard Benda tell me that "Benda did it" is not the whole story, and maybe not even a true story.

Richard Benda could have told us many things to dispel that story. He could have told us what Joop Bollen and James Park were doing to Northern Beef Packers' finances in 2009. Richard Benda could have told us how Northern Beef made $95 million in EB-5 investment disappear into bankruptcy. He could have shared with us—with GOAC, with the FBI—his conversations with Bollen, Park, and Rounds during his tenure as GOED secretary. He could have told us what events carried him from the seemingly happy days of jet-setting to Southeast Asia and the Philippines through 2012 down to being pushed out of Northern Beef Packers and off the EB-5 gravy train in early 2013, bouncing from a consulting job in Sioux Falls to Russ Olson's old job at Heartland in Madison, and ultimately alone (we assume) to a shelterbelt near Lake Andes, where (we are told) he took his own life with a shotgun blast to his gut.

Maybe Benda saw the fix was in. Maybe he didn't think he could beat the evidence the state had against, real or not. Maybe he saw himself out of the inner circle and all of the people who could have helped him beholden to power and money. Maybe he foresaw perfectly before that fatal shot that his former friends in the SDGOP would put EB-5 in one neat box and bury it with him. Maybe his death said, "Cory, forget EB-5. You can't beat these guys."

I spent this year trying to piece together the story Benda wouldn't tell, the story that would shift some of the blame piled on his defenseless corpse onto the shoulders of those still living and rolling in their ill-gotten EB-5 gains..

In practical terms, I failed. The GOP won its immediate objective: blow smoke on EB-5, win the election, keep GOP hands on all the levels of power we can keep a lid on the story. No one—not Bob Mercer, not Denise Ross, not Kathy Tyler and Patrick Duffy and the Democratic Party—managed to part that smoke with a narrative clear enough to explain to South Dakota voters that EB-5 was built on an absurd and illegal conflict of interest and that our next Senator Mike Rounds knew that and was fine with that.

EB-5 killed Richard Benda. EB-5 did not kill the South Dakota Republican Party that hung Benda out to dry. But EB-5 still epitomizes the corruption and cover-ups of South Dakota's one-party rule. EB-5 remains a story that needs to be told. Richard Benda's unusual and suspicious death rightly riveted my attention and many others' on the EB-5 story in 2014. In that regard, Richard Benda is thus, sadly, the man of the year in South Dakota politics.

The South Dakota Banking Commission has yet to take any public action on Brown County's request that it investigate EB-5 czar Joop Bollen's SDRC Inc. for possible evasion of bank franchise tax. Director of Banking Bret Afdahl sent SDRC Inc. a letter requesting information in September; as far as we know, SDRC Inc. is almost 60 days past the normal 30-day reply time.

If the Banking Commission is alarmed, they aren't showing it. Bob Mercer reports that the Banking Commission is meeting Friday at the Minnehaha Country Club (hey, can public bodies meet at private country clubs?), and SDRC Inc.'s bank status is nowhere on the agenda.

Well, maybe not nowhere. There is an executive session at the end. So maybe, just maybe, there's an interesting conversation to be had after the duck à l'orange. We can only hope that somebody in Pierre is taking their obligation to get answers about EB-5 seriously.

These ten South Dakota legislators, the current members of the Government Operations and Audit Committee (GOAC), are responsible for a farcical travesty of legislative inquiry and public accountability. These ten legislators have foisted on South Dakotans the insult masquerading as a report fulfilling their duty to investigate the Governor's Office of Economic Development and South Dakota's troubled EB-5 visa investment program.

The report rubber-stamps the audits and reforms discussed last winter, before GOAC received its legislative charge to investigate GOED and EB-5. It accepts without challenge the Swiss-cheese stories told by Rounds and Bollen. The only new work products produced by GOAC itself are two pieces of legislation that would tighten conflict-of-interest restrictions on state employees and make those restrictions last for one year after an employee leaves the state payroll. Even in proposing those modest reforms (the sort of no-duh rules that we should be embarrassed that we don't already have), GOAC focuses solely on Benda's alleged crimes and completely ignores Bollen's conflict-of-interest violations that cost the state millions.

GOAC makes its stonewalling stupidity clearest on page 5 of its report. Making hay of Richard Benda's diversion of $550,000 from Future Fund Grant #1434 (a grant Mike Rounds signed for Northern Beef Packers, with Benda pressing, knowing that Benda was going to be involved with the beef plant when he left Pierre, which facts trouble GOAC not one whit), GOAC mentions that it asked Bollen about how that chunk of the grant got converted into Benda's hefty pay as NBP's EB-5 loan monitor.

When asked about the $550,000 loan monitoring fee collected by Richard Benda from NBP, Mr. Bollen stated that he had no specific knowledge of Richard Benda collecting the loan monitoring fee [GOAC final report, 2014.11.28, p. 5].

This reading of Bollen's comments is incorrect and inconsistent with GOAC's own bogus conclusions. In his arrogant and cynical written response to GOAC after the election (oh, did I mention conveniently delayed?), Bollen said he set up the loan monitor job for Benda [page 9]. Bollen said Benda worked for Bollen's EB-5 management company, SDRC Inc. [Question 15, p. 13]. When GOAC asked Bollen how SDRC Inc. compensated Benda, Bollen said "Mr. Benda was paid pursuant to the terms of a contract for loan monitoring the NBP project, which was required under the loan with NBP. The terms of the contract contain private business information" [Question 8, p. 12]. Bollen's response that he had "no specific knowledge" of "how and why... Benda [was] involved in collecting the loan monitoring fee" [Question 20, p. 14] was at best legalistic if not patently absurd: he created the loan monitor job, hired Benda, and knew the terms of the contract well enough to choose to hide them from GOAC.

Bollen knows exactly how and why Benda collected his hundreds of thousands of dollars. He hid that information, and GOAC went "Ro-de-do-de-do, we don't need to know!"

To top off their obtusity, Tidemann and friends ignore Bollen's dismissal of their whole Benda-as-fall-guy thesis. Bollen cites NBP lawyer Rory King's argument, floated to Bob Mercer a year ago, that the loan-monitoring fees were perfectly legitimate. Senator Tidemann, when you simultaneously cite a source to support your thesis then ignore that source's rebuttal of your thesis, you come out looking like monkeys.

I hate to include the Democrats on this committee, Rep. Susan Wismer and Senator Larry Lucas, in the monkey pile. Rep. Wismer did expose GOAC's stonewalling and bring the EB-5 issue back to life last summer. Senator Lucas brought forth most of the substantive questions about Benda, Bollen, Rounds, and other players in the EB-5 scam, but he also strangely and incorrectly declared Senator Tidemann's conduct of the GOAC hearings "fair and non-partisan." Senator Lucas says he's considering filing a minority report, although why he and Rep. Wismer haven't already written that report and demanded its inclusion on the record is beyond me.

But this shame falls on all ten members of the Government Operations and Audit Committee, on all of a Legislature that accepts Chairman Tidemann's conclusion that "no further action was necessary," and on all of South Dakota, for electing such gutless, incurious, and feckless legislators.

Update 06:15 CST: Senator Lucas tells AP that minority report will happen, along with a call for a special prosecutor and further GOAC investigation. But he also says "it’s our due diligence as state officials to make sure we have covered all our bases in the matter" and that "Right now I’d say we’re about on third base." Third base? I don't know what puritans Larry's been making out with, but in my backseat, GOAC hasn't even gotten to first.

Pat Powers notices that Mike Rounds got campaign money from TURPAC, the National Turkey Federation PAC. $5,000, according to Open Secrets, the fourth-highest amount TURPAC gave to any of its favored seventeen Senate candidates. Rep. Kristi Noem got $2,500 in turkey money, above the median for TURPAC donations to 74 House candidates. TURPAC gave Noem $2,000 in 2012. Prior to that, I find TURPAC contributing $1,000 to Stephanie Herseth in 2006, $1,000 to Tom Daschle in 2004 and $2,000 in 1998, and $500 to John Thune in 2000 and $500 in 1998.

Related: The Government Operations and Audit Committee of the South Dakota Legislature quietly signed off Friday on blaming Richard Benda for everything wrong with the state's EB-5 program. I'll have more on GOAC's reprehensible report later.

Four weeks ago, Denise Ross posted a stunning article in the Mitchell Daily Republic that put then-Governor Mike Rounds in the room in 2009 with key players in the EB-5/Northern Beef Packers/Epoch Star financing scheme. That statement called into question Rounds's claim that he and the state had no involvement in securing the $30-million Epoch Star loan for Rounds's favored but failing NBP project. Ross also learned from California financier David Kang that EB-5 czar Joop Bollen and lawyer pal James Park had "complete control" of NBP's finances and wrecking NBP:

"They were in over their heads. They didn't understand how to do development, construction projects, things of that nature. That's ultimately why they fell flat on their face," he said [Ross, 2014.10.17].

Evidently that article got Bollen's lawyer Jeff Sveen a little hot. He contacted the Mitchell Daily Republic to set the record straight... not about his beleaguered client, but about himself. You see, in the middle of her article, Ross mentioned this comment from Kang:

Richard Benda also was involved in the plant, Kang said, although not to the extent of Bollen and the Hanul law firm. He was working to promote the project but was not involved in day-to-day operations. Aberdeen attorney Jeff Sveen also was involved, Kang said, as "one of Joop's partners."

Northern Beef's CEO, David Palmer, and others were not allowed to make decisions or administer accounts, Kang said [Ross, 2014.10.17].

Four weeks later, late in Friday's news cycle, the Mitchell Daily Republic runs this correction:

In an Oct. 17 article that began on Page A1 relating to Joop Bollen and Northern Beef Packers, The Daily Republic quoted Los Angeles management consultant David Kang's statement that attorney Jeff Sveen of Aberdeen was "one of Joop's partners." Sveen has since advised The Daily Republic that he is not one of Joop's partners. Accordingly, The Daily Republic retracts its statement that Sveen was a partner of Joop Bollen ["Correction," Mitchell Daily Republic, 2014.11.14].

Jeffrey T. Sveen, not Joop Bollen's partner

Role-play time! Pretend you are Joop Bollen's lawyer on October 17, 2014. You check your voicemail or your e-mail and you see Denise Ross was trying to get a hold of you (Denise Ross is a pretty good journalist; she'd have sought comment from Sveen for her story, wouldn't've she?). You click your Mitchell Daily Republic bookmark, and there's David Kang talking smack about your client.

Now remember, Joop is more than a client; he's a pal. He helped you swing $55 million in EB-5 money for your turkey plant in Huron in 2009. What do you do for a pal like that?

You call Ross right back. Denise! Sorry I didn't get back to you sooner. I see you've gone ahead and published. Do you have time for me to set a few things straight?

You tell Denise that Joop is a righteous dude with lots of good business sense. Look how he's been able to parlay his low-income Aberdeen rentals into vast personal wealth capable of collecting and donating Egyptian antiquities! You tell Denise she ought to publish that side of the story ASAP to counter Kang's criticism. And Denise Ross, good journalist that she is, surely hustles to put your story into print to round out the initial Kang story. The Kang article appears on a Friday; I bet by end of business Monday, we have your side of the story, and the bloggers are all like, Oh, that mainstream media, jumping to conclusions! Jeff Sveen sure set Denise Ross straight! Now where can I get a mummy mask....

But what really happens? Jeff Sveen gets hold of the paper and says, Partner? Don't go calling me Joop Bollen's partner! Somebody—maybe the paper, maybe Jeff Sveen—waits four weeks to get the counter-claim out. Four weeks? It doesn't take four weeks to say, "I'm not Joop Bollen's partner." Four weeks is more like the time one would spend haggling with lawyers about defamation... if there were any defamation here... and if there is, calling a guy Joop Bollen's partner seems the least of it.

So the Mitchell Daily Republic publishes a damning article about Joop Bollen, and all Bollen's lawyer gets retracted is one statement about Bollen's lawyer. That's either bad lawyering or a signal that Ross nailed the truth in her story about Bollen, Park, and the EB-5/Northern Beef Packers/Epoch Star shenanigans and that Jeff Sveen just doesn't want his name dragged into the mess.

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